Question

During the first month of operations ended July 31, YoSan Inc. manufactured 8,800 flat panel televisions, of which 8,300 were sold. Operating data for the month are summarized as follows:

Sales		$1,494,000
Manufacturing costs:
Direct materials	$748,000
Direct labor	220,000
Variable manufacturing cost	193,600
Fixed manufacturing cost	96,800	1,258,400
Selling and administrative expenses:
Variable	$116,200
Fixed	53,500	169,700

Required:

1. Prepare an income statement based on the absorption costing concept.

YoSan Inc.
Absorption Costing Income Statement
For the Month Ended July 31
Sales		$
Cost of goods sold:
Cost of goods manufactured	$
		$
		$

Feedback

1. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = income from operations
*(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units)

Learning Objective 1 and Learning Objective 2.

2. Prepare an income statement based on the variable costing concept.

YoSan Inc.
Variable Costing Income Statement
For the Month Ended July 31
		$
Variable cost of goods sold:
	$
		$
		$
Fixed costs:
	$
		$

Answer 1

Solution 1:

YoSan Inc.
Absorption Costing income statement
For the month ended July 31
Sales		$14,94,000
Less: Cost of Goods Sold:
Cost of Goods manufactured	$12,58,400
Less:Ending Inventory ($1258400/8800*500)	$71,500
Cost of goods sold		$11,86,900
Gross Profit		$3,07,100
Less: Selling and administrative expenses:
Variable	$1,16,200
Fixed	$53,500
Total Selling and administrative expenses		$1,69,700
Income From Operations		$1,37,400

Solution 2:

YoSan Inc.
Variable Costing income statement
For the month ended July 31
Sales		$14,94,000
Variable Cost of Goods sold:
Direct material ($748000/8800*8300)	$7,05,500
Direct Labor ($220000/8800*8300)	$2,07,500
Variable Manufacturing Cost ($193600/8800*8300)	$1,82,600
Total Variable Cost of Goods sold		$10,95,600
Variable selling and administrative expense		$1,16,200
Contribution Margin		$2,82,200
Less: Fixed Costs
Fixed Manufacturing Overhead	$96,800
Fixed Selling & Administrative Expenses	$53,500
		$1,50,300
Income From Operations		$1,31,900